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Defense cuts on the horizon: Should firms notify workers layoffs?

A battle over mandated reductions to defense spending is heating up, as two moves by the Obama administration on just how the government will respond drew sharp rebukes from Republicans, who say the administration is trying to obscure the potential pain of the cuts.

At issue is a $1.2 trillion sequester, negotiated as part of the 2011 deal to raise the national debt limit by ensuring equivalent spending cuts. The Pentagon is to take $600 billion of that hit, the first $55 billion of which comes due on after Jan. 1.

Because many defense firms would see their revenue slashed, several Pentagon contractors have said they would have to provide their employees with layoff notices to comply with a federal labor law, known as WARN, that requires federal contractors to give notice 60 days before impending layoffs. The CEO of Lockheed Martin recently threatened to send layoff warnings to all of his 120,000 employees just days before the November election.

To Republicans, the prospect of mass defense industry layoffs right before Election Day could be a significant political driver for a deal on replacing at least the first year of cuts.

That was, at least, until the Department of Labor cautioned defense firms not to issue such notices in an advisory published Monday. "In fact, to provide such notice would be inconsistent with the purpose of the WARN Act," the advisory said.

“Given that Federal Agencies, including [the Department of Defense], have not announced which contracts will be affected by sequestration were it to occur, and that many contracts may be completely unaffected, the actual contract terminations or cutbacks that will occur in the event of sequestration are unknown,” it added. “Thus, in the absence of any additional information, potential plant closings or layoffs resulting from such contract terminations or cutbacks are speculative and unforeseeable.”

Meanwhile, the White House Office of Management and Budget said, ahead of testimony before the House Armed Services Committee on Wednesday, that it would exempt military personnel from any cuts, should the sequester go into place.

These developments angered GOP lawmakers, who charged that the Obama administration is more interested in obscuring the impact of the pending cuts than it is in negotiating an alternative.

"Rather than coming to the table with Republicans and Democrats in Congress to finally address the issue of budget sequestration, the Obama Administration is flailing around attempting to make sequester look less devastating than it actually is,” said GOP Sens. John McCain of Arizona, Lindsey Graham of South Carolina, and Kelly Ayotte of New Hampshire, in a joint statement Tuesday. The GOP trio of defense hawks stumped at town meetings in Florida, North Carolina, Virginia, and New Hampshire earlier this week to make their case that the nation needs to avoid $55 billion in mandated spending reductions on defense.

They charge that the White House is choosing political expediency – no potential pink slips before the election – over being straight with defense industry employees.

“It was so politically contrived,” Senator Ayotte said in Norfolk, Va., on Monday. It means that President Obama "doesn’t want people to know that there are layoffs looming.”

The Obama administration is attempting to “intimidate” defense contractors, Sen. John Cornyn (R) of Texas added, at a press conference on Tuesday.

Democrats dismissed such concerns as alarmist. “This is an important and correct interpretation of the law,” said Rep. Adam Smith (D) of Colorado, the top Democrat on the House Armed Services Committee, of the Labor Department's move. “There is no reason to needlessly alarm hundreds of thousands of workers when there is no way to know what will happen with sequestration.”

Part of the problem, the GOP trio acknowledged on Monday in Norfolk, was that the two sides are “miles apart,” as Senator Graham put it. They charge that Mr. Obama is largely to blame for not entering the fray to help bridge the gap.

“The president of the United States is the commander in chief, and the president of the United States has taken a hike. He’s missing in action on this issue,” Senator McCain said Monday.

The Republican senators said they would even be willing to cross the GOP fiscal Rubicon – higher tax revenues – to avoid the defense cuts, a message they said should signal to Democrats that they’re serious about finding a compromise.

That offer was not lost on Democrats, but it wasn't enough to bring them back to the negotiating table. “There are some glimmers of hope out there, and I must particularly recognize Senator Graham for talking publicly about revenue,” said Sen. Jack Reed (D) of Rhode Island in a conference call on Tuesday. “There’s a long way from talking about revenue to actually voting for provisions that increase revenue, but at least the dialogue is going away from this very ideologically [driven], very rigid approach that we saw last year.”

Mostly, Democrats claimed that Republicans were engaged in political theater away from Washington when they could actually make a difference in the argument by negotiating with their colleagues in the Senate.

“The point of their trip is to call for defense cuts ... and have those defense cuts replaced with some revenues. Well, that's good. But I say to my Republican colleagues, I couldn't agree more that deficit reduction should include revenues, and they should spend their time getting their fellow Republicans on board,” said Senate majority leader Harry Reid (D) on Tuesday.